As Russia's economic growth slows, analysts and business leaders have warned of deep and wide-reaching political consequences if the situation deteriorates further.
Speculation about a growing rift between President Vladimir Putin and Prime Minister Dmitry Medvedev have been fueled by concerns about the country's economy, which were exasperated by economic data released on Monday.
HSBC's Russia purchasing managers' index (PMI) survey showed that manufacturing activity in May was the weakest in five months, falling to 50.4 in May from 50.6 in April. The data also revealed that firms had cut staff for the seventh month in a row.
"Manufacturing has continued gradually losing growth momentum," Alexander Morozov, chief economist for Russia at HSBC in Moscow, said in a statement. "Intakes of new orders were getting weaker, laying down the ground for preservation of conservative business expectations and restrained output growth."
It follows a slowdown for five consecutive quarters which prompted Russia's economic ministry to cut the country's growth forecasts for 2013 in April, from 3.6 percent to 2.4 percent. Over-reliant on its gas and oil industry, the world's largest oil producer has also been hit by a decline in the commodity's price as it struggles to diversify its economy.
These economic woes have drawn attention to the apparent differences of opinion between the country's president and prime minister. Putin, who would like to see looser fiscal policy to promote growth, has appeared to grow increasingly impatient with Medvedev, whose government imposed limits on spending and borrowing in 2012 and said they would stick to them despite the slowdown.
'This Time It's Different'
Marcus Svedberg, chief economist at independent asset manager East Capital, told CNBC that rumors about a rift between Putin and Medvedev had been going on for so long, one could be forgiven for ignoring it - until now.
"The tandem has been declared dead so many times that one may be excused for not paying too much attention. But this time may be different," Svedberg said last week.
"Medvedev has lost popular support, his approval ratings have dropped, and is increasingly marginalized at the top. Putin has openly criticized the government, has fired several key people in the government and is more directly involved in government business – all serving to undermine Medvedev."
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He said there was plenty of speculation that Medvedev would be replaced. "Possibly by former Finance Minister Kudrin, which would be market positive. Medvedev may be number two in the formal hierarchy, but is clearly dispensable in the actual power structure."
Talk of a rift intensified in April when a video came to light showing the president berating senior ministers within Medvedev's government. He slammed their "worthless" work on social spending and failure to present a program for diversifying the country's economy.
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